Classification Of Different Funding Rounds

We often Witness Funding news nowadays with terminologies like Pre-seed, Seed, Series A and other funding rounds. It becomes difficult for a common person to understand the nuances of the news as they are sometimes not aware of the nuances. India has witnessed more than 108 Unicorns so far and is prepared to see many more. To simplify this understanding here is the classification of different funding rounds with the expert opinion.

Pre-seed and seed funding round

Pre-seed and Seed Funding rounds are considered to be the earliest rounds. However, it becomes industry specific which one is earliest.

Pre-Seed Funding means when the startup is in the stage of product building, Ideation stage and others. In this round usually Founders, friends and family are the investors.

The seed-Funding round is considered to be the first official funding round. It represents the funds that the startup is going to get officially. There are many potential investors in a seed funding situation: founders, friends, family, incubators, venture capital companies and more.

Series A

In this stage, the startup is still in the developing stage and is considered a critical stage. It is considered a high-risk investment by investors. The funding round usually sees participation from traditional Venture Capitalist firms.

 In the Series A round, usually $2 million to $15 million of capital is raised. However, the amount changes for industries and according to the valuation of the company.

“This stage is the growth stage capital or we call it the expansion capital. A startup at this stage is generally doing good and is now raising to play along with the classes instead of the masses. This is when they enter the soonicorn, unicorn journey.

To the best of my understanding raising Seed to Series A capital is the most difficult phase as a lot of companies are monitored carefully and out of 1000’s few 10’s are selected,” said Prateek Toshniwal Angel Investor.

Series B

In this stage, the company usually has a higher valuation because they are established. In this stage, the company’s valuation becomes higher as this round comes when the company is on the growth path and has identified the market space for itself and shows long-term profit-giving plans.

The Series B round has valuations between $30 million and $60 million. However, It changes with the different factors and valuations.

Series C

The Series C Funding round takes place when the companies are quite successful and are looking for rapid growth. They look for additional funding in order to help them develop new products, expand into new markets, or even to acquire other companies.

In Series C, groups such as hedge funds, investment banks, private equity firms, and large secondary market groups accompany the type of investors mentioned above. The reason for this is that the company has already proven itself to have a successful business model.